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publié dans Revue Grain de sel le 27 novembre 2007

Before EPAs, a system that was hardly conducive to agricultural development in ACP countries

Roger Blein/Vincent Ribier

Accords de Partenariats Economiques (APE)

Initially signed for 5 years in 1975, the Lomé Convention governed relations between the European Union (EU) and the ACP countries between 1975 and 2000. The Lomé Convention included two complementary elements, development assistance (with the European Development Fund, EDF) and a trade agreement characterised by non-reciprocal tariff preferences. This trading system is still in force today and will be removed only when the Economic Partnership Agreements (due to be signed in December 2007) are actually put in place. The principle of the trade agreement was to grant preferential access to the European market for ACP exports. The tariff preference they enjoyed resulted from the fact that their exports were taxed less than similar commodities imported from Latin America or South-East Asia. The preferences could be of even greater benefit as competing products were heavily taxed. They were non-reciprocal preferences, granted unilaterally by the EU with no obligation for the ACP countries to adopt the same practices with regard to European exports.

A trading system based on non-reciprocal tariff preferences. European customs duties generally escalate in line with the level of processing or added value of the product: the more the commodity is processed, thus adding value, the higher the customs duties are. These “tariff escalations” have been removed for most ACP-exported commodities, except for processed goods containing sugar (including cocoa by-products), fish and vegetables. The consequence is that a processed commodity is generally granted higher trade preference than a raw commodity or agricultural product.
Thus, also taking into account the customs duties on products from Latin America and Asia on the European market, the most significant preferences have historically involved certain processed agricultural products, horticultural products, agricultural products covered by the European Union’s Common Agricultural Policy, fishery products, timber, hides and skins, textile products and garments.

Protocols for competing products. Preferential access to the European market was strengthened by the existence of “Protocols” for four commodities (bananas, meat, sugar and rum). These protocols made it possible for certain ACP countries to enjoy advantageous prices on the European market for given quantities, i.e., quotas. Thus, under the “Sugar protocol”, 1.8 million ACP tons were paid for at 95% of the EU domestic price, which has long been about double the world market price.
However, the quotas were not evenly distributed amongst the ACP countries. Mauritius alone captured one-third of the ACP sugar quota, representing 600,000 tons, and three other countries (Fiji, Guyana and Swaziland) captured another third. Côte d’Ivoire and Cameroon captured together almost half of the banana quota, with the rest going to the Caribbean countries. Finally, only six countries could access the beef quota.
STABEX, one of the aid disbursement mechanisms (EDF), also contributed to support export earnings, constituting another source of support for ACP exports (cf. box below the article).

Agricultural trade in favour of the ACP countries. EU-ACP agricultural trade is historically characterised by a trade balance that is clearly in favour of the ACP zone: ACP agricultural exports to the EU are about three times as much as European exports to the ACP zone.
The structure of ACP agricultural exports has been relatively stable over time, even though notable changes can be identified:

  • ACP agricultural exports are still dominated by the group of tropical beverages (cocoa first, but also coffee and, to a lesser extent, tea). Accounting for more than 40% of total agricultural exports in the 80s and early 90s, their share is still nearly 30%;
  • Fishery products have clearly been on the rise for more than fifteen years now, whether fresh, frozen or canned fish. A few other products have also boomed during the same period, particularly cut flowers (cf. box), fruit and vegetables (except for pineapple, penalised by the Ivorian crisis and which has lost significant market share to the advantage of Costa Rica);
  • On the other hand, other products have stood pat. This is the case for protocol-subjected products (sugar and bananas), but also cotton and oilseeds.

Clearly defined specialisations in different regions. ACP agricultural exports are concentrated in particular geographical areas. Three regions account for nearly three-quarters of total ACP exports: the Southern African Development Community (SADC) including South Africa, the Economic Community of West African States (ECOWAS) and the East African Community (EAC). The different ACP regions have very different agricultural export structures ². West Africa predominantly exports cocoa; SADC, fish and seafood; the Caribbean countries export mostly beverages and sugar and; the Pacific, oilseeds. East African exports are more balanced, including fish, coffee, sugar and cut flowers. It should be noted that the structure of South African agricultural exports, based on fruits (citrus fruits, grapes, apples), whether fresh, in juice or canned, is radically different from the structure of the other SADC countries. The wide range of export structures amongst the ACP sub-regions shows to what extent there is very little convergence of interests, therefore very few opportunities to create synergies amongst the regions around the issue of export promotion.

More homogenous importation structures amongst the ACP regions. The agricultural import structure is much more homogenous than the export structure. The majority of the regions import the same groups of products, namely cereals and cereal products, dairy products and by-products and, to a lesser extent, meats, fish, oils and vegetables.
Whereas the European Union accounts for only 9% of the world cereal exports, it provides more than 20% of the grain imported by ACP countries, which reflects a privileged relationship between the two groups of countries. It should be noted however that, with a 36% share of the ACP market, the United States is by far the main supplier of these countries. The United States is present in certain large markets where Europe is almost absent, such as Nigeria, which imports more than one million tons annually. Conversely, the EU is actively involved in the West and Central African Francophone countries.

A generally disappointing assessment of trade preferences. Trade cooperation aimed at export promotion and diversification. In this regard, the ACP performance is not brilliant. What have we observed?

  • A marginalisation of ACP countries. Their share of exports on the European market has steadily decreased, despite the preferences and enlargement of the ACP Group of States, dropping from 6.7% of all extra-community imports in 1976 to 3% in the early 2000s. The trend is the same for agricultural products. –* Dependence on primary products. The export products have only slightly diversified and remain essentially primary products, with very little added value. In the early 90s, three major export commodities accounted for nearly two-thirds of total exports on average in the African countries, against slightly more than one third 30 years earlier. Many countries are dependent on a single commodity for more than 40% of their export income. The exports of agricultural raw materials constitute nearly half of ACP exports, excluding the oil producing countries. The share of agricultural exports represents more than 50% of total exports in Madagascar, Côte d’Ivoire, Burkina Faso, Kenya, Malawi, Mali, Uganda, Tanzania and the Caribbean banana producing countries. –*A non-dynamic specialisation. Specialising exports around raw materials is not a very effective approach; consumption increases very little and raw material prices keep on decreasing compared with the price of manufactured products. Terms of trade have been deteriorating steadily in Sub-Saharan Africa since the end of the 1970s. The rate of deterioration is estimated at 3% annually throughout the 80s and 90s, that is to say a loss of earnings in terms of import purchasing power assessed at 0.75% of GDP/year. Such specialisation also weakens the economies by subjecting them to the global markets’ vagaries. The exposure level of ACP countries’ trade ³ to global agricultural market instabilities averaged 14% in the 90s. While this figure seems low, it actually conceals considerable disparities amongst the ACP countries. During the same period, 43 ACP countries had an exposure level higher than 20%, and 24 countries were above 30%. –*Dependence on the European market. ACP exports are still very dependent on the European market, up to 40% approximately. However, European imports have changed and the relative importance of primary commodity imports has decreased, from 50% of EU imports (excluding oil) under Lomé Convention I (1975-1980) to less than a third today. Between 1963 and the early 2000s, the share of agricultural commodities in the total imports of Western Europe dropped from 33 to 13%. Primary commodities decreased from 60% to 40% of total European imports from developing countries. However, for ACP countries, they have only marginally decreased, and they still account for two-thirds of EU imports.

As a result of this unsatisfactory performance, debate on trading system reform opened at the end of the 90s. But this disappointing performance is not attributable to the trading system alone. The ACP economic and agricultural crisis and the agricultural policy collapse have also significantly impacted on the ACP States’ capacity to take advantage of the opportunities of the Lomé Conventions.

The analyses in this article are a synthesis and update of a study focusing on: “Les concurrences et complémentarités des agricultures de l’Union européenne et des pays ACP” (Competition and complementarity of European Union and ACP agricultural production) carried out by the authors in 2000 for the French Ministry of Agriculture. This study (published in french only) is accompanied by a set of maps and fast-reference cards organised according to sector and region. These are available on Inter-réseaux’s web site: www.inter-reseaux.org

Export earnings stabilisation mechanisms: an assessment
The Lomé Convention between the EU and the ACP countries envisaged a mechanism for the stabilisation of ACP export earnings: STABEX. This mechanism offsets the loss in export revenues suffered for each one of the 49 commodities, mainly agricultural products, listed in the Convention and for which the revenues were higher than a certain percentage of the country’s total export earnings. The loss in export earnings was calculated in relation to a base period and could be the result of either a decline in prices or a decrease in exported volumes. The amount of the transfer under STABEX was calculated based on the drop in export earnings observed.
STABEX undeniably helped to protect the countries producing eligible products more than other countries and it was modified to take on board many more products and countries. It had, however, very serious limitations: only some of the countries (73% of the funds went to ten countries between 1975 and 1993) and products (mainly coffee and cocoa) were covered; disbursement procedures were very slow; funds were misused – going more to support public finances than to support production; and there was confusion between stabilisation and support of export revenues, with the EU being the sole financer. In 2000, the Cotonou Agreement abolished STABEX.
contribution of Arlène Alpha, Groupe de recherche et d’échanges technologiques (GRET)

Kenyan cut flower exports
Making the most of the preferences granted by the EU, Kenya pushed itself up to the first rank of rose suppliers to the European Union, moving from 2% of imports in 1988 to 50% today, well ahead of the traditional supplying countries (Columbia, Ecuador, Morocco, Israel). Kenyan horticultural exports, principally roses, are today greater than tea exports or the revenues derived from tourism.
There are several explanations for this success – a climate favourable for the production of roses, which allows for year-round production; significant foreign (European) investment; attractive government measures; adaptation to market demands with new varieties. Finally, Kenyan roses freely access the European market, while those from Morocco are subjected to quotas and 8.5% customs duties. Since 2003, the roses from Ecuador and Columbia also freely enter the European market because of the GSP+ * system that encourages sustainable development.
contribution of Bénédicte Hermelin (Groupe de recherche et d’échanges technologiques, GRET)

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